E-Malt.com News article: 2410

Scottish & Newcastle has recently posted the results for the year to 31 December 2003, which show a good performance from International Beer, improving sales trends in the UK, underpinned by recovery in supply chain service levels, and strong sales and volume momentum from BBH.

Underlying Foster’s volumes increased by 5% during 2003. Strongbow volumes increased by 7% following acquisition against the comparable period in 2002. Underlying Kronenbourg volumes increased by 4% during 2003. On an underlying basis, BBH sales grew by 16%, underpinned by volumes +8%. Underlying Newcastle BrownAle volumes increased by 9% during 2003.

The Managed Retail business was successfully sold for £2.5bn, ahead of market expectations and two months ahead of schedule. Net debt/equity shareholder funds fell to 69% at 31 December 2003 from 141% at 27 April 2003. The board is recommending a dividend of 13.41p for the eight months to 31 December 2003. “In the past eight months we have seen
considerable progress in both the organic development of the Group and in certain key transactional initiatives,” Sir Brian Stewart, company’s Chairman said.

Premium brand volumes in S&N International Beer business grew 7% in the twelve months to December 2003 against the
comparable period, helped by Kronenbourg 1664 up 5% in France, Grimbergen up 13% in Belgium and Newcastle Brown Ale up 12% in the USA.

On an underlying basis, BBH sales grew 16% underpinned by beer volumes +8%. Market share in Russia grew to 33% and in the Ukraine to 22%. The Managed Retail business was successfully sold for £2.5bn. Proceeds from the sale were the major factor in the reduction in gearing levels to 69% by 31 December 2003 from 141% at 27 April 2003.

S&N, through its subsidiary, Scottish Courage, is the market leader in the UK with 27% market share and leading brands such as Foster’s, Kronenbourg 1664, John Smith’s and Strongbow. The results for 2003 (December) bene.ted from the acquisition of Bulmer which has been consolidated for six months from 1 July 2003 when the transaction became unconditional. The UK market continued to grow by 1% during calendar 2003, led by the off trade, which grew by 7% whilst the on trade declined by 2%. The first four months of 2003 were affected by poor consumer con.dence in the lead up to the Iraq war but the industry was boosted by a strong summer season. The off trade market particularly bene.ted from the hot summer, which increased demand for “at home” drinking. There also continued to be deep discounting in supermarkets, which helped to stimulate demand. Scottish Courage volumes grew by 9% during calendar 2003, with performance improving through the year ending in a positive Christmas period; volumes in the two-month period before Christmas were up by 10%. Despite competitive trading conditions, Scottish Courage continued to resist discounting as heavily as its competitors; however, duty exclusive prices did fall by 1.5% in comparison to calendar 2002.

S&N owns 50% of BBH in a joint venture with Carlsberg Breweries. BBH is headquartered in Stockholm and owns subsidiaries in the markets in which it operates, most of which have minority shareholders who are largely local management. BBH is the market leader in Russia, the Baltic countries and Kazakhstan and number two in the Ukraine. These are some of the fastest growing beer markets in the world, underpinned by rising per capita consumption from a low base and an improving economic environment.

BBH’s results show continued sales and volume development in calendar 2003, demonstrating the underlying strengths of its businesses. Beer volumes grew 8% overall to 30 mhl after a weak .rst quarter which was depressed by a severe winter in Russia. Gross margins for calendar 2003 fell only slightly (by 0.6% points), demonstrating robust demand for BBH’s brands. Operating pro.t for the year was held back by increased investments in brewing and distribution infrastructure as well as the negative impact of currency.

S&N completed its joint venture in India in May 2003. This business, which currently has 14 breweries (5 owned (with two under construction) and 7 under contract with United Breweries) has long term prospects for pro.table growth. The key brands are Sandpiper and Zingaro.

S&N has signed a “Share Transfer and Co-operation Agreement” with Chongqing Beer Group in China to buy a 19.5% stake in Chongqing Beer Company Limited for £35m in cash. Completion of the transaction is expected to take several months and is dependent on Chinese government approvals, further due diligence and the signing of other relevant documentation.


30 March, 2004